Stock Option Plan



 Exhibit 10.2 
  
 ARENA RESOURCES, INC. 
 STOCK OPTION
PLAN 
  
 Purpose. 
  
 The purpose of this Plan is to enable the Company and its stockholders to
secure the benefits of common stock ownership, or increased ownership, by key personnel of the Company. The Board believes that the granting of options under the Plan will foster the Company’s ability to attract, retain and motivate those
individuals who will be largely responsible for the continued profitability and long-term future growth of the Company. 
  

	1.	Shares Subject to the Plan. 

  
 The Company may issue and sell a total of 1,000,000 shares of its Common Stock pursuant to the Plan. Such shares may be either authorized and unissued or
held by the Company in its treasury. New options may be granted under the Plan with respect to shares of Common Stock which are covered by the unexercised portion of an option which has terminated or expired. 
  

	2.	Grant of Options. 

  
 Options may be granted under the Plan to present or future key employees of the Company or any subsidiary of the Company that may hereafter exist (a
“Subsidiary”) within the meaning of Section 425(f) of the Internal Revenue Code of 1986, as amended (the “Code”), to directors, including non-employee directors of the Company, and to consultants to the Company. Subject to the
provisions of the Plan, the Committee (defined in paragraph 4 below) shall from time to time select the key personnel of the Company and its Subsidiaries to whom options under the Plan will be granted, and shall fix the number of shares covered by
each such option and establish the terms and conditions thereof (including, without limitation, exercise price and restrictions on exercisability of the option or on the shares of Common Stock issued upon exercise thereof and whether or not the
option is to be treated as an incentive stock option within the meaning of Section 422 of the Code (an “Incentive Stock Option”). 
  

	3.	Administration. 

  
 The Plan will be administered by a committee (the “Committee”) consisting of at least two directors appointed by and serving at the pleasure of
the Board. The Committee members appointed effective with the adoption of this plan are Stanley M. McCabe and Lloyd T. Rochford. 
  
 Subject to the provisions of the Plan, the Committee, acting in its sole and absolute discretion, shall have full power and authority to grant options
under the Plan, to interpret the provisions of the Plan and option agreements made under the Plan, to supervise the 
  

 1 








 administration of the Plan, and to take such other action as may be necessary or desirable in order to carry out the
provisions of the Plan. A majority of the members of the Committee shall constitute a quorum. The Committee may act by the vote of a majority of its members present at a meeting at which there is a quorum or by unanimous written consent. The
decision of the Committee as to any disputed question, including questions of construction, interpretation and administration, shall be final and conclusive on all persons. The Committee shall keep a record of its proceedings and acts and shall keep
or cause to be kept such books and records as may be necessary in connection with the proper administration of the Plan. 
  
 No member of the Committee shall be personally liable by reason of any contract or other instrument executed by him or on his behalf in his capacity as a
member of the Committee or for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other officer, employee or director of the Company to whom any duty or power relating
to the administration or interpretation of the Plan has been delegated, against any cost or expense (including reasonable counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Committee) arising out of
any act or failure to act in connection with the Plan, unless arising out of such person’s own fraud or bad faith. 
  
 The Committee may seek and rely on the advice of accountants, legal counsel and other professionals as it deems necessary or advisable for the operation
and administration of the Plan. The fees of any such professionals shall be borne by the Company. 
  
 Notwithstanding the authority delegated above to the Committee, any action which may be taken by the Committee with respect to the administration of the
Plan, including the granting of any option thereunder, may also be taken by the Board of Directors, and each reference to actions taken or authority exercised by the Committee hereunder shall be deemed to include actions which may be taken or
authority which may be exercised by the Board. 
  

	4.	Terms and Conditions of Options. 

  
 Each option granted under the Plan shall be evidenced by a written agreement in a form approved by the Committee. Each such option shall be subject to the
terms and conditions set forth in this paragraph and such additional terms and conditions not inconsistent with the Plan (and, in the case of an Incentive Stock Option, not inconsistent with the provisions of the Code applicable thereto) as the
Committee deems appropriate. 
  
 a. Option
Price. In the case of an option which is not treated as an Incentive Stock Option, the purchase price per share shall not be less than 85% of the fair market value of a share of Common Stock on the date the option is granted; and, in the case of
an Incentive Stock Option, the purchase price per share shall not be less than 100% of the fair market value of a share of Common Stock on the date the option is granted [110% in the case of an optionee who, at 
  

 2 








 the time the option is granted, owns stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or a Subsidiary (a “ten percent shareholder”)]. For purposes hereof, the fair market value of a share of Common Stock on any date shall be equal to the closing sale price per share as published by a
national securities exchange on which shares of the Common Stock are traded on such date or, if there is no sale of Common Stock on such date, the average of the bid and asked prices on such exchange at the closing of trading on such date or, if
shares of the Common Stock are not listed on a national securities exchange on such date, the average of the bid and asked prices in the over the counter market at the close of trading on such date, or, if the Common Stock is not traded on a
national securities exchange or the over the counter market, the fair market value of a share of the Common Stock on such date as determined in good faith by the Committee. 
  
 b. Option Period. The period during which an option may be exercised shall be fixed by the Committee
and shall not exceed ten years from the date the option is granted (five years in the case of an Incentive Stock Option granted to a “ten percent shareholder”). 
  
 c. Exercise of Options. No option shall be exercisable unless the person to whom the option was
granted remains in the continuous employ or service of the Company or a Subsidiary for at least one year from the date the option is granted. Subject to earlier termination of the option as provided herein, unless the Committee determines otherwise,
the option will become exercisable in accordance with the following schedule based upon the number of full years of the optionee’s continuous employment or service with the Company or a Subsidiary following the date of grant: 
  

							
	 Full Years of Continuous
 Employment
Service

	  	 Incremental Percentage of
 Option Exercisable

	 	 	 Cumulative
 Percentage of Option
 Exercisable

	 
	 Less than 1
	  	0	%	 	0	%
	 1
	  	20	%	 	20	%
	 2
	  	40	%	 	40	%
	 3
	  	60	%	 	60	%
	 4
	  	80	%	 	80	%
	 5 or more
	  	100	%	 	100	%

  
 All or part of the
exercisable portion of an option may be exercised at any time during the option period, except that, without the consent of the Committee, no partial exercise of an option shall be for less than 100 shares. An option may be exercised by transmitting
to the Company: (1) a written notice specifying the 
  

 3 








 number of shares to be purchased; and (2) payment in full of the purchase price (or, if applicable,
delivery of a secured obligation therefor), together with the amount, if any, deemed necessary by the Committee to enable the Company to satisfy its income tax withholding obligations with respect to such exercise (unless other arrangements
acceptable to the Committee are made with respect to the satisfaction of such withholding obligations). 
  
 d. Payment of Option Price. The purchase price of shares of Common Stock acquired pursuant to the exercise of an option granted
under the Plan shall be payable in cash and/or such other form of payment as may be permitted under the option agreement, including, without limitation, previously-owned shares of Common Stock. The Committee may permit the payment of all or a
portion of the purchase price in installments (together with interest) over a period of not more than five years. 
  
 e. Rights as a Stockholder. No shares of Common Stock shall be issued in respect of the exercise of an option granted under the
Plan until full payment therefor has been made (and/or provided for where all or a portion of the purchase price is being paid in installments). Upon receipt of full payment, the Company shall notify its Transfer Agent and the Transfer Agent shall,
on behalf of the Company, prepare a certificate or certificates representing such shares acquired pursuant to exercise of the option, shall register the holder of the option as the owner of such shares on the books of the Company and shall cause the
fully executed certificate(s) representing such shares to be delivered to the holder as soon as practicable after payment of the option price in full. The holder of an option shall have no rights as a stockholder with respect to any shares covered
by an option until the date a stock certificate for such shares is issued to him or her. Except as otherwise provided herein, no adjustments shall be made for dividends or distributions of other rights for which the record date is prior to the date
such stock certificate is issued. 
  
 f.
Transferability of Options. No option granted under the Plan shall be assignable or transferable except by will and/or by the laws of descent and distribution; and each such option shall be exercisable during the optionee’s lifetime only
by him or her. 
  
 g. Termination of
Employment or Other Service. If an optionee ceases to be employed by or to perform services for the Company or any Subsidiary for any reason other than death or disability (defined below), then each outstanding option granted to him or her under
the Plan shall terminate on the date thirty (30) days after the date of such termination of service (or, if earlier, the date specified in the option agreement). If an optionee’s employment or service is terminated by reason of the
optionee’s death or disability, then each outstanding 
  

 4 








 option granted to the optionee under the Plan shall terminate on the date 120 days after the date of such
termination of employment or service or, if earlier, the date specified in the option agreement. For purposes hereof, the term “disability” shall mean the inability of an optionee to perform the customary duties of his or her employment or
other service for the Company or a Subsidiary by reason of a physical or mental incapacity which is expected to result in death or be of indefinite duration. 
  

h. Incentive Stock Options. In the case of an Incentive Stock Option granted under the Plan, at the time the option is granted,
the aggregate fair market value (determined at the time of grant) of the shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by the optionee during any calendar year shall not exceed $100,000.

  
 i. Changes in Capital Stock. In the
event of a stock dividend or in the event that the outstanding shares of the Common Stock shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation, whether
through reorganization, recapitalization, stock split-up, combination of shares, sale of assets, merger or consolidation in which the Company is the surviving corporation, then appropriate adjustments will be made to the number, nature and/or
purchase price of the shares which may be issued under the Plan or purchased under an outstanding option. Upon the dissolution or liquidation of the Company, or upon a reorganization, merger or consolidation of the Company as a result of which the
outstanding securities of the class then subject to options hereunder are changed into or exchanged for cash or property or securities not of the Company’s issue, the Plan shall terminate and all options theretofore granted hereunder shall
terminate, unless provision is made for the assumption of such options or the substitution for such options with options covering the stock of a successor employer corporation, or a parent or a subsidiary thereof, with appropriate adjustments as to
the number and kind of shares and prices. If the unexercised options shall terminate pursuant to the foregoing sentence, all persons entitled to exercise any unexercised portions of options then outstanding shall have the right, within a reasonable
period of time prior to the consummation of the transaction causing such termination, to exercise (or, in the sole discretion of the Board, to receive other consideration for) the unexercised portions of their options, including, if the Board so
determines, the portions thereof which would, but for this paragraph, not yet be exercisable. 
  
 j. Other Provisions. The Board may impose such other conditions with respect to the exercise of options, including, without
limitation, any condition relating to the application of federal or state securities laws, as it may deem necessary or advisable. 
  

 5 








 k. Legend on Certificates. The certificates representing shares acquired upon
exercise of options shall carry such appropriate legend, and such written instructions shall be given to the Company’s Transfer Agent, as may be deemed necessary or advisable by counsel to the Company in order to comply with the federal or any
state securities laws. 
  

	5.	Amendment and Termination of the Plan. 

  
 The Board may amend or terminate the Plan. Except as otherwise provided in the Plan with respect to equity changes, any amendment which would increase the
aggregate number of shares of Common Stock as to which options may be granted under the Plan, materially increase the benefits under the Plan, or modify the class of persons eligible to receive options under the Plan shall be subject to the approval
of the holders of a majority of the Common Stock issued and outstanding. No amendment or termination may adversely affect any outstanding option without the written consent of the optionee. 
  

	6.	No Rights Conferred. 

  
 Nothing contained herein will be deemed to give any individual any right to receive an option under the Plan or to be retained in the employ or service of
the Company or any Subsidiary. 
  

	7.	Governing Law. 

  
 The Plan and each option agreement shall be governed by the laws of the State of Nevada. 
  

	8.	Term of the Plan. 

  
 The Plan shall be effective as of March     , 2003, the date on which it was originally adopted by the Board. The Plan will
terminate on March     , 2013, as to Incentive Stock Options granted thereunder, and on March     , 2023, as to non-qualified stock options granted thereunder, unless sooner terminated by the
Board. The rights of optionees under the options outstanding at the time of the termination of the Plan shall not be affected solely by reason of the termination and shall continue in accordance with the terms of the option as then in effect or
thereafter amended. 
  

 6